Winsor warns banks on Network Rail restructuring

By Edward Simpkins

12:01AM BST 04 Jul 2004

Tom Winsor, who quit as rail regulator on Friday, has issued a warning that the interests of banks that have lent Network Rail some £13bn could be damaged by the imminent shake-up of the rail industry.

Next week the Department for Transport will publish a White Paper which is expected to abolish the Strategic Rail Authority, the Government's executive rail agency, and bring Network Rail, the not-for-profit company that owns and manages the UK's railways, under its direct control.

Winsor fears that such a move could contradict assurances given to Parliament by Alistair Darling, the transport secretary, that the interests of third parties, such as private sector lenders and investors, would not be affected by the restructuring.

"If they change the law to establish a direct legal link between Network Rail and the Government, that would alter the rights of third parties; it would create a new right for government to control Network Rail," Winsor told The Telegraph.

Lenders to Network Rail, which later this year will seek to raise a further £6bn of debt, are wary of excessive political control over the company following the huge losses caused by the Government's decision to push Railtrack into administration.

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The independent financial regulation of Network Rail is seen by the City as a vital safeguard when pricing lending to the company. Any weakening of the regulator's role could raise the company's cost of borrowing.

According to Winsor, assurances made by Darling about the rights of third parties in February were "very specific and important".

He said: "If the assurances are broken then the Government will have made a promise which it will have broken, which would be regrettable."